Blis chalks up loss of $14.3m

By DANIEL RIORDAN biotechnology writer

Blis Technologies lost $14.3 million in its first year as a listed company after writing off all its intellectual property.

The company, which listed last July, reported an operating loss of $1.9 million for the year to March 31, and wrote off a further $12.4 million.

Blis lost $156,000 in the eight months to March 31 last year. Revenue was $244,000 in the latest 12-month period, compared with $38,000 for the eight months.

Blis said it had changed its accounting policy on recognising intellectual property as an intangible asset. It had written off all intellectual property, including patents, trademarks and acquired scientific research.

In addition, all costs related to creating and acquiring intellectual property had been expensed as incurred.

The company said that while the new policy presented its balance sheet in a "very conservative manner", it did not reflect any change in directors' view of the company's prospects.

Blis' financial position was more than $1 million better than forecast in its listing profile, in spite of the bringing forward of some spending into this financial year.

That spending had been brought forward to ensure a launch of its first product, K12 Throat Guard, as early as possible, and to take advantage of the seasonal occurrence of sore throats.

The $12.4 million written off comprises $3 million in intellectual property, and $9.4 million in scientific research acquired from 20 per cent shareholder Otago University. During the year Blis issued the university shares worth that amount as payment for its research.

Chief executive Kelvin Moffatt said the writeoff was made so that future profit would be a truer reflection of how the company was doing.

"Our belief is that when an investor looks at Blis they look at cashflow and burn rate - how much we're spending on research and development versus revenues - and to have a book figure of what was paid for intellectual property would just confuse the issue."

Did the writeoff of intellectual property imply it was worth nothing?

"That's always a concern, that people would get that impression. But now we've got a product to market, we're confident we can say to people, clearly there's a lot of value in our intellectual property."

The Stock Exchange's flagship biotechnology company, Genesis Research & Development, has a similar policy. Genesis expenses all its R&Dcosts in the period incurred anddoes not value its intellectual property until it is producing revenue.

Moffatt said almost all pharmacies were stocking K12 and an extensive advertising campaign had been "very successful" in driving sales.

The second month of sales (beginning this week) would be crucial.

Moffatt said Blis' next product - a treatment for tooth decay using the same "good" bacteria as K12 - was being tested, patents had been applied for, and the company hoped to have the product on the market within a year.

Blis shares, which listed at $1.05, were unchanged yesterday at 45c.

Apart from Otago University, the main shareholders are Southern Capital, with 15 per cent, and South Island entrepreneur Howard Paterson, with 11.